SG Market (06 Jul 17)

MARKET OVERVIEW
- The market is likely to bobble around as sentiment is lifted by the rebound in tech names and divided Fed views over the timing of interest rate hikes and unwinding of its balance sheet, which could benefit banks.
- But oil-related counters may face renewed selling pressure after crude prices slumped more than 4% to US$45 on worries that Russia is averse to deeper output cuts.
- Technically, the STI broke back above its 20 and 50-dmas in an engulfing move but remains trapped within its 3,190-3.275 trading range.

SECTOR WATCH
*Technology
- Global chip sales surged 22.5% to a all-time high of US$31.9b in May, the strongest y/y growth since Sep '10.
- The sales momentum turned positive in Aug '16 (+1.3%) and has been accelerating monthly since then.
- This is likely to bode well for SG semiconductor names like AEM, UMS and Micro-Mechanics.

*Banks
- MAS will delay the implementation of the Fundamental Review of the Trading Book (FRTB) rule by a year following concerns over the complexity of the regulation as well as uncertainty about how they will fit with other capital reforms.
- FRTB rules would require banks to hold more capital against their trading books and were scheduled to become effective in Jan '19.
- The move follows similar postponements by banking regulators in Hong Kong and Australia.
- Within the banking sector, MKE prefers DBS (Hold, TP: $19.18) over UOB (Hold, TP: $20.80) and OCBC (Hold, TP: $9.85).

POSITIVE NEWS
*SIA
- According to IATA, demand for global air freight jumped 12.7% in May as new export orders hover close to six-year highs.
- Set against a capacity growth of 5.2%, industry load factors rose 3ppts to 45.2%, its highest level since Jul 2014.
- SIA cargo load factor climbed 4.2ppts in May to 66.5%, although outperformance was mainly due to traffic (+10.1%) outpacing capacity growth (+3.1%).
- MKE last had a Hold with TP $9.70.

NEUTRAL NEWS
*Noble
- Acquired an additional 50% stake (current: 50%) in Tailai Coal (Shanghai) for US$5.4m (1.2x P/B).
- 1Q17 net loss of US$129.4m was attributable to the decoupling of prices across coal markets which resulted in hedging losses.
- Currently trading at a distressed 0.13x P/B.

*Maxi-Cash
- Its rights issue of 1-for-6 existing shares at $0.17 apiece was 100.5% subscribed.
- Net proceeds of $20.4m will be channelled to its secured lending business ($10m) and for general corporate and working capital purposes ($10.4m).
- Theoretical ex-rights price at $0.183.

*SGX:
- Appointed Professor Hans Tjio as the deputy chairman of the listings advisory committee (LAC), replacing Professor Tan Cheng Han, who will be appointed as chairman of the new Singapore Exchange Regulation entity.
- Professor Tjio joined the LAC as a member since Feb '16, and the vacant member role will be filled by Goh Kian Hwee.
- Goh is the joint group managing director of QAF, and a non-executive independent director of CapitaLand Commercial Trust Management.

*Mirach Energy
- MOU with Malaysia-listed PRG Holdings to explore a proposed JV to undertake property and construction projects, mainly in Malaysia.
- Group is expected to contribute funds, an amount to be determined, for initial working capital of JVco for its first project.
- PRG will source for the first project, as well as provide construction expertise, help obtain bank facilities and licenses for the first project.

*First Ship Lease Trust
- Issued a write of summons to former CEO Alan Hatton, for breach of his duties owed to the company.